Indonesian businesses struggle to retain talent

Experts stress fostering positive work environment, offering clear career paths to boost employee long-term retention

JAKARTA, Indonesia (MNTV) — Despite a vast labor force, Indonesian businesses are struggling with hiring and retaining top talent, reports ANN. 

As the government looks to prohibit arbitrary practices like withholding employees’ graduation certificates, companies must find better ways to navigate a labor market marred by low productivity and educational gaps, exports say.

Private-sector companies argue that a dynamic job market, where workers can easily switch jobs and employers quickly fill vacancies, is the ideal situation, but experts emphasize that fostering a positive work environment, offering clear career paths and investing in training are crucial to boosting employee engagement and long-term retention.

On May 5, Statistics Indonesia (BPS) reported that the country’s labor force has grown to 153.05 million, with 145.77 million people employed, full-time or part-time, marking a 2.52 % increase year-on-year.

However, despite a slight dip in the unemployment rate from 4.82% to 4.76%, the number of unemployed individuals rose by 1.11% to 7.28 million.  

According to a survey conducted by the Indonesian Employers Association, 30% of local companies struggle to find high-quality talent. 

The challenge largely stems from the composition of the workforce, where 36.54% have no degree beyond elementary school, if any at all, while only 12.66% hold a university degree.

Apindo labor affairs deputy chair Bob Azam said Indonesia’s manpower law remained too rigid, creating high barriers for employees to enter and leave jobs. 

A more dynamic market, where professional workers actively sought new opportunities, he argued, would lead to a healthier labor environment.

“Some skills take time to develop, and we need to retain people for that. However, the ideal market is fluid, where we constantly develop successors for each position. Building a successor [pipeline] is the best retention strategy,” he said.

Some companies have resorted to controversial tactics to retain employees, such as holding workers’ graduation certificates, even after they have left the company. 

The Manpower Ministry has acknowledged that this practice remains prevalent in some regions, having received thousands of complaints about similar cases. 

The issue came to a head after an investigation ordered by Surabaya Mayor Armuji in April revealed that a company had been holding the graduation certificates of dozens of employees, sparking widespread public outrage.

In response, the ministry is now preparing regulations to ban such practices. Deputy Manpower Minister Immanuel Ebenezer stated on April 27 that the government would actively track down businesses holding certificates and take legal action against them.

Yosminaldi, chairman of the Association of Indonesian Human Resource Practitioners (ASPHRI), said Indonesian talent is of high quality but many local companies fail to provide job security, a comfortable work environment or clear career paths, pushing some skilled workers to seek opportunities abroad instead. 

He noted that companies often struggle to offer what is needed to motivate a workforce that wants more than just financial rewards, especially since many employees now belong to Generation Z, a cohort known for being critical, open-minded and rational. 

“With a large pool of potential employees compared to the available [number of] jobs, some companies have become arrogant in their recruitment practices,” he said. “They operate with a ‘one falls, a thousand rise’ mentality, which leads to a dismissive attitude toward employees.”